Market News
IMF warns Japan of spillovers from rising foreign market volatility - REUTERS
By Leika Kihara
Summary
- Japan's debt-servicing cost to double by 2030, IMF says
- IMF welcomes Japan's commitment to flexible exchange rates
- BOJ must closely monitor liquidity conditions, funding rates
- Faster-than-expected rate hike could disrupt banks, JGB market
TOKYO, Feb 7 (Reuters) - Japan should be on alert for any spillover effects from rising foreign market volatility that could affect liquidity conditions for its financial institutions, the International Monetary Fund said on Friday.
The IMF also said the country needed to be vigilant about monitoring any fallout from the Bank of Japan's interest rate rises, such as an increase in the government's debt-servicing costs and a possible jump in corporate bankruptcies.
"As interest rates rise, the cost of servicing the large public debt is expected to double by 2030, putting a premium on a robust debt management strategy," the IMF said in a statement released after its consultation with Japanese policymakers.
"In the face of rising gross financing needs and a shrinking BOJ balance sheet, government bond issuance will need to rely on additional demand from foreign investors and domestic institutions," it said.
